Growth crisis in France in 2024

France has entered a period of deflation according to the latest figures from INSEE, after a four-year period of inflation mode. The decline in inflation is the consequence of the shock remedy inflicted on the French economy by the European Central Bank. The 4.5% rate has caused an economic slowdown leading to a growth crisis. A growth crisis leads to an increase in the unemployment rate, a loss of job means loss of income and therefore a reduction in spending. From there, business growth slows or becomes negative in some cases.

Throughout the inflationary period, the French suffered a clear drop in their purchasing power, despite certain salary increases. For 2024, concerns persist. The French are worried and are forced to restrict food spending. You should know that in 2023, 1 in 2 French people have reduced the frequency or quality of their meals, turning more and more towards low-priced products. We also cannot ignore the growing number of people using food banks. The French are very worried and the restrictions imposed on food must compensate for the fixed monthly expenses, rent, energy, credits which weigh on the budget.

Poverty sets in and increases, hitting the most vulnerable hardest.

We have reached the point where the act of consuming less to reduce costs is relevant, the wave of “resellers” has arrived. So much so that the shame of having to steal has crossed over into the shame of consuming. The era of mass overconsumption is being driven by the reality of 13% cumulative inflation and 20% food inflation. We have all lost purchasing power in France, only the recipients of the SMIC (Minimum Growth Salary) have maintained it knowing that their salary is low to begin with. We are all forced to make consumer decisions. Despite our average life expectancy of 82 years, we will be forced to make additional efforts in 2024. We are moving towards a different way of life dictated by growth and currency issues.

The bottom line is that we are not out of the current crisis: inflation is falling because the cost of energy is falling and the world is slowing growth.
The human problem that arises and that we must urgently address when making our societal choices is the protection of the most vulnerable. 9 million low-income people in France will be faced with the problem of unemployment and its dramatic consequences. I hear with bitterness the lying cries of economic victory. The optimistic messages from our current Minister of the Economy cannot hide the 3,000 billion euros deficit (around €40,000 per French), 110% of GDP. We are already in trouble with rising unemployment and falling consumption.

The 2024 finance law indicates a deficit of 143 billion to complete the budget. Compared to a household budget, it is 3000 euros of income for 5000 euros of expenses. Our country has increased its debt by 2,000 billion euros in 20 years, including a foreign trade deficit of 160 billion. In 2024, the debt burden will be France’s first budget. The observation is that France is in a state of recession. We will feel the effects from January.

In principle, low growth or even a lack of growth blocks access to employment for new arrivals on the market. It is therefore urgent and necessary to create jobs.

However, France has chosen to make unemployment benefits shorter and weaker through the new reform, to reduce the costs impacting the state coffers and to encourage the unemployed to take any job offered in phase or not with the training of applicants. A form of desire for a return to full employment. France will create poor and precarious workers without social protection. This is an attack on our social system.

The country is almost incapable of creating jobs. There will be less social protection, therefore an increase in precariousness and poverty.
Optimistic figures and encouraging statistics hide reality.
For example, an unemployed French executive could be a VTC driver (Tourist Vehicle with Driver) or switch to RSA (Active Solidarity Income). From a human point of view we are far from the spirit of fraternity so precious to France.
The madness of the French system has triggered the serious housing crisis, which in addition to unemployment and poor jobs will weigh down the French economy in 2024.

The housing crisis is a crisis that worries the political and business world.

In French society, there are French people who do not have housing and others who will no longer be able to find housing. There are French people who have a job, who are waiting for social housing without obtaining it given the waiting times, there are French people who sleep on the street or in their car. There are children without homes. Indecency. Terrible reality.

This crisis is growing at high speed. We are facing a double crisis, housing crisis, construction crisis.

It is therefore a tangible and worrying situation at the social level which is emerging for 2024. An irradiation which can become uncontrollable from a social point of view, in fact fueling the speed of decommissioning.
The residential route has seized up. The path in previous generations of being a renter, and then moving into homeownership is blocked. At the end of your professional life you could feel protected by your property and live your retirement more peacefully. Today, mobility within social housing is less, leading to accelerated unemployment through inertia. The result is downgrading.

These are the ingredients of a social bomb for the year to come.

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Jean-Luc GINDER Economiste

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